SAN FRANCISCO (MarketWatch) -- American Express reported a 38% drop in second-quarter net income late Monday and warned that it won't be able to meet long-term financial targets until the economy improves.
     The credit card company said second-quarter net income came in at $653 million, or 56 cents a share, versus $1.06 billion, or 88 cents a share, a year earlier.
     The latest results include $600 million that the company added to reserves to cover bad loans in the U.S., the company said. There was also one other $136 million charge and a tax benefit of $101 million.
     American Express AXP was expected to make 83 cents a share, according to the average estimate of 16 analysts in a Thomson Reuters survey.
     "We do not expect to meet or exceed our long-term financial targets until we see improvements in the economy," Kenneth Chenault, chief executive of American Express, said in a statement.
     American Express shares fell 9.3% to $37.11 during late trading on Monday
     Credit-card companies are being hit as slumping house prices, slowing economic growth and rising unemployment limit the ability of some customers to pay back debts racked up on their cards.
     In June, American Express warned that indicators of credit were continuing to deteriorate beyond its expectations. See full story.
     Rival Discover Financial Services DFS said soon after that it expected higher charge-offs later this year. See full story.
     Capital One Financial COF, another big credit card company, reported a 40% drop in second-quarter net income last week. See full story.
     Discover shares declined 5.5% to $14.35 in late trading on Monday, while Capital One fell 5.8% to $39.64.

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